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Please score - Appearing for GMAT in 10 days [#permalink]
03 Feb 2013, 01:19
The following appeared in an Excelsior Company memorandum.
"The Excelsior Company plans to introduce its own brand of coffee. Since coffee is an expensive food item, and since there are already many established brands of coffee, the best way to gain customers for the Excelsior brand is to do what Superior, the leading coffee company, did when it introduced the newest brand in its line of coffees: conduct a temporary sales promotion that offers free samples, price reductions, and discount coupons for the new brand."
The above argument states that The Excelsior plans to replicate the strategies that Superior used while launching their newest brand of coffee and thus establish their own brand of coffee. The reasoning is flawed and fails to address factors such as the existing brand value of The Excelsior, the loyalties of coffee consumers and the effectiveness of the promotional strategies. Once we analyse these points it will be clear that the strategy The Excelsior plans to follow relies on certain assumptions and is completely flawed.
Firstly, The Excelsior plans to introduce its own coffee and in order to successfully penetrate a market the marketing strategies should be carefully devised. However, blindly replicating the marketing strategy followed by Superior is not going to be helpful. Transition to being a market player in the same industry will not be as much of a challenge as it would be to penetrate a completely different market from its current line of operations. If The Excelsior is currently hailed as a media mogul, then certainly they need to devise a well-researched strategy to penetrate the beverage market. Clearly the strategy that The Excelsior presently plans to replicate is not the best one and the reasoning is flawed.
Furthermore, the fact that coffee lovers more often than not shop for their preferred brands makes it all the more difficult for The Excelsior to detract their loyalties. If The Excelsior plans to poach on rival loyalists and create their own brand fan-following, it must customize its approach in the market and not just copy the strategies used by Superior. Moreover, doing so will only result in a skewed approach in establishing a new product by a new seller in a market which has established brands to compete with. While The Excelsior may have invested significantly into its coffee brand, it must also research its market, user preferences, advertising strategies used by its other competitors.
While The Excelsior plans to offer promotions such as free samples, price reductions and discount coupons we really cannot predict how far these strategies will help The Excelsior in the long run. Only a fraction of the coffee consumers might be lured to using the free samples and price reductions The Excelsior plans to offer. However, unless the product has what it takes to be a success in the competitive beverage market, we can easily say that the marketing strategy that The Excelsior plans to follow is very shortsighted and bound to fail. Not much information has been provided about the product and hence we really cant comment on the effectiveness and curiosity The Excelsior will manage to generate once it launches its product.
To conclude, the strategy The Excelsior plans to use is completely unrealistic and flawed as it is not a well-researched one. There are many aspects such as the demand, brand loyalty, consumer preferences, pricing etc that need to be taken into consideration while devising an effective marketing strategy to introduce a new product in a competitive market.